'SOL 200 Target Weekly Covered Call ETF' Pays 170 Won per Share as September Distribution

Monthly Distribution Yield of 1.43%

Shinhan Asset Management announced on October 1 that it paid out 170 won per share as the September monthly distribution for the 'SOL 200 Target Weekly Covered Call' Exchange-Traded Fund (ETF).

According to Shinhan Asset Management, based on the closing price on September 28, the day before the ex-dividend date, the monthly distribution yield was 1.43%.

The 'SOL 200 Target Weekly Covered Call' ETF utilizes the KOSPI200 Index as its underlying asset. It aims for a monthly payout by generating option premium and dividend income. The fund employs a target covered call strategy: it invests in the KOSPI200 while weekly selling domestic weekly call options to capture option premiums. Additional distribution sources come from dividend income generated by KOSPI200 constituent stocks.

This ETF has been providing monthly distributions for six consecutive months, starting with its first distribution in April after being listed in March. The initial payout reflected approximately 1.5 months of performance after listing and resulted in a relatively high distribution yield, while subsequent monthly yields have been maintained at around 1.4%.

Unlike traditional covered call strategies, which sell call options on the entire portfolio, the target covered call approach flexibly adjusts the proportion of options sold to achieve a target premium. This means that when the underlying assets rise, the strategy can offer a higher participation rate in the market than a standard covered call strategy. It aims for regular monthly distributions while also minimizing the risk of being left out in a rising market.

In addition, under current tax laws, capital gains from trading listed options based on domestic stock indices are not included in the tax base price for ETFs. As a result, investors using individual accounts can expect less tax burden on distributions compared to covered call ETFs based on foreign assets, and distributions derived from such option trading gains are also excluded from the scope of comprehensive financial income taxation. However, dividend income generated from KOSPI200 constituent stocks and included in the distribution may still be subject to dividend income tax.

Jung-Hyun Kim, Head of the ETF Business Group at Shinhan Asset Management, commented, "Recently, Korea’s stock market has continued to fluctuate without a clear direction due to geopolitical uncertainties, rising U.S. Treasury yields, and weaker investor sentiment for tech stocks amid discussions about the pace of AI development. This pattern is likely to persist for some time. At times like this, when it is difficult to predict market direction, the target covered call strategy becomes increasingly valuable, as it allows investors to pursue regular cash flow through options premiums while maintaining the potential for stock price appreciation."

He added, "Although the SOL 200 Target Weekly Covered Call ETF is fundamentally affected by the performance of its underlying KOSPI200 index, the use of option premiums and dividend income enables it to consistently pursue a certain level of monthly distribution. Even in a prolonged period of market uncertainty, it is a highly practical product for investors seeking to continue investing in Korea’s equity market while securing monthly cash flow."

This content was produced with the assistance of AI translation services.